(Refiles, updates time in paragraph 3)
* Oil down the day after record one-day rally
* Market awaits details of U.S. government's rescue plan
* U.S. oil sector recovering slowly from Hurricane Ike
(Updates prices with Brent settlement)
By Jane Merriman and Alex Lawler
LONDON, Sept 23 (Reuters) - Oil prices fell 2.5 percent on
Tuesday, reversing direction after Monday's dramatic rally as
dealers focused on slowing global energy demand and doubts over
a U.S. plan to rescue the financial sector.
A rebound in the U.S. dollar added to weakness across
commodities markets, continuing a strong negative correlation
between the greenback and commodities that has been in place
for several months.
U.S. crude for November <CLc1> dropped $2.76 to settle at
$106.61 a barrel, after rising nearly $7 on Monday. November
Brent crude <LCOc1> traded down $2.96 at $103.08.
The losses followed a record surge of nearly 16 percent in
the now-expired U.S. October crude contract on Monday. The U.S.
Commodity Futures Trading Commission said it was reviewing the
price jump to ensure trading was valid.
Dealers said Monday's price surge was supported by a weak
dollar plus hopes the $700 billion U.S. bailout plan would ease
the global financial crisis and support demand in the world's
top energy consumer.
But concerns political resistance could delay the rescue
package weighed on global markets on Tuesday. []
"It started off with a wave of optimism and now perhaps a
bit of realism has kicked in," said Christopher Bellew, a
broker at Bache Commodities.
U.S. Treasury Secretary Henry Paulson urged Congress not to
weigh down the proposed financial system bailout with unrelated
provisions. []
WEAK DEMAND
After hitting a record high of $147.27 a barrel in July,
oil dropped to around $91 a barrel last week on mounting
evidence that high energy costs and slowing economic growth
were having an impact on fuel demand in large consuming
nations.
U.S. oil consumption is running about 4 percent below last
year, according to the latest government data.
But prices have rebounded after Hurricane Ike battered U.S.
oil infrastructure this month. Nearly 70 percent of production
remains closed in the Gulf of Mexico, home to a quarter of U.S.
output. []
A Reuters poll of analysts ahead of weekly U.S. government
inventory data due on Wednesday forecast that crude stocks fell
by 2.0 million barrels last week due to disruptions caused by
Ike. []
Distillate stocks were forecast to have fallen by 1.5
million barrels, with gasoline stocks expected to have dropped
by 4 million barrels after Ike shut Gulf Coast refineries.
News that Saudi Arabia cut supplies to oil companies,
reported by Reuters on Monday, as well as unrest in Nigeria and
higher-than-expected Chinese imports, also supported prices.
The BP Plc-led <BP.L> Baku-Tbilisi-Ceyhan (BTC) oil
pipeline has shut down for a short period of planned
maintenance, BP said, but exports will not be affected.
[]
(Additional reporting by Fayen Wong in Perth, Matthew Robinson
and Joe Brock in London and Richard Valdmanis and Robert
Gibbons in New York; Editing by Gene Ramos)
